Loong Industries Sells Materials on March 16 for $12,000 Cash

question 16

Multiple Choice

Loong Industries sells materials on March 16 for $12,000 cash, subject to 8% sales tax. The cost of the materials sold is $5,700. The revenue portion of the transaction is recorded as:

• A)Debit Cash $12,000; credit Sales Taxes Payable $960; credit Sales $11,040.
• B)Debit Accounts Receivable $12,960; credit Sales $12,000; credit Sales Taxes Payable $960.
• C)Debit Cash $12,960; credit Sales $12,000; credit Sales Taxes Payable $960.
• D)Debit Sales $12,960; credit Cash $12,000; credit Sales Taxes Payable $960.
• E)Debit Cash $12,960; credit Sales $12,960.

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Definitions:

Fixed Manufacturing Overhead

Costs in manufacturing that do not vary with the level of production, such as salaries of supervisors and rent of the factory.

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted; it contributes towards covering fixed costs and generating profit.

Direct Labor

The wages paid to workers who physically produce products or are directly involved in providing services.

Fixed Manufacturing Overhead

The consistent expenses tied to manufacturing that do not vary with the level of production, such as salaries of managerial staff and depreciation of equipment.